Did you know that employees in most countries outside the United States have a contractual right to continued employment, whether or not they have written contract? If an employer does not provide an employee with a written contract, rights will be implied at law to the advantage of the employee and disadvantage of the employer. In some countries, employers are required by law to provide employees with written contracts or they can be penalized. American employers often do not realize that offer letters—no matter how much “at-will” language is included in them—may constitute employment contracts, albeit without all the bells and whistles that should be included to protect the company. Moreover, once an offer letter is signed, it may be too late to make changes.
In fact, the inclusion of “at-will” or “this-is-not-a-contract” language in non-U.S. employment contracts and policies has often been used to invalidate those terms that are unfavorable to employees. After all, if the employer does not recognize an instrument as a contract, why should the employee abide by his or her so-called obligations? And beware: “at-will” language is often perceived as evidence of a U.S. employer’s ignorance of and indifference to local law, which is never helpful in the event of a labor dispute.
Rather than shying away from full-blown local employment contracts and “making do” with U.S.-style documents, employers should embrace the opportunity to control risks and avoid common pitfalls. Below are just a few examples of international differences that can end up being costly or burdensome—or both—for employers.
Canada: Termination Entitlements
In Canada, a well-drafted contract could mean the difference between paying a couple months’ severance or a couple years’ worth! If you have employees in Canada in any province other than in Quebec, you can control termination costs through some very simple language added to their employment contracts. But make sure the contract is signed beforethe employee starts working; if not, you will be at the mercy of the very generous common-law entitlements that have developed over the years, which may require you to provide up to 24 months of notice—or pay in lieu of notice—to dismissed employees.
France: Noncompetition Agreements
How would you like to pay your employee to compete with you? Noncompetition agreements must be very precisely drafted in order to be enforced in a French court. If you use a typical U.S.-style noncompetition agreement that does not compensate the employee in exchange for his or her agreement not to compete, French courts will likely release the employee from the noncompetition agreement and require you to continue paying the employee on a monthly basis after his or her employment is terminated. Minimum payments are usually 33 percent of an employee’s prior remuneration package per month for the duration of the noncompete term and may reach 60 percent depending on the applicable collective bargaining agreement.
Germany and South Korea: Data Privacy
In Germany and South Korea, employers can be hamstrung by data-privacy rules when managing employee information. The laws of each of these countries require employers to include very specific data privacy language in contracts. Failure to include such language may result in the company being unable to transfer and use its employees’ information in the ordinary course of business. The situation is similar throughout the countries of the European Union in varying degrees.
Unlike the United States where the “at-will” regime is standard, employers abroad do not need to be wary of providing employees in other countries with rights by providing them with a contract. These employees already have rights! Now it is time for you to protect yours.